U.S. Communities: A Look at the Extremes

April 9, 2014

There's no better way to assess the health and wellbeing of the U.S. than by looking at its communities. While it's true that no two communities are identical, the diversity of the country's fabric isn't infinite. In fact, a recent report from The Demand Institute identified nine distinctive American community profiles and then ranked them according to their economic strength, ranging from those in the strongest position to those facing the greatest economic stress.

To determine the nine profiles, The Demand Institute, a non-advocacy, non-profit think tank jointly operated by The Conference Board and Nielsen, conducted an economic analysis of 2,200 cities and towns to gain insights into thedistribution of household wealth. It then extracted about 100 local economic metrics commonly used to profile community economic health. And finally, the analysis incorporated input from interviews with 10,000 representative U.S. households to construct the most complete picture possible of the dynamics of each of these communities.

A Look at the Affluent Extreme

When looking at the outer bands of the nine segments, "Affluent Metroburbs" and "Cosmopolitan Suburbs" reside at the strongest end of the economic spectrum and "Challenged" and "Endangered" communities — home to the country's most distressed cities and towns — live at the opposite end. A range of communities dwell between the extremes, but the ones at the edges provide the clearest picture of just how different the economic conditions are within American communities.

Huntington Beach, Calif., is a prime example of a thriving economically strong Affluent Metroburb — one of 220 The Demand Institute identified. Life in Huntington Beach is in fact a beach — nicknamed "Surf City, USA" because life for the 200,000 residents there revolves around the sand, surf and all of the activities that come with year-round good weather, fostering a thriving pulse of tourism and a vibrant retail landscape. The aerospace industry is an important local employer, and the community as a whole boasts low unemployment and rising home prices — which, through early 2013, climbed 13 percent each year following the market trough.

Affluent Metroburbs like Huntington Beach are near big cities, offering many of the advantages of big cities with none of the drawbacks. The communities boast solid schools and low crime rates. Affluent Metroburbs have the highest median household income, and within these high-earning, well-educated populations, many heads of household have white-collar jobs. Not surprisingly, these communities also have the highest median home prices in the U.S. — $490,000 in early 2013.

Cosmopolitan Suburbs are a little less well known by name than many of the Affluent Metroburbs, but their population and growth trends put them on pace to be significant forces in the near future. These fast-growing, contemporary suburbs offer distinctive services, wide-ranging amenities, proximity to major cities and extensive public services.

The attractiveness of these communities is widely recognized, and 70 percent of the residents in them say they plan to stay put for at least five years. In aggregate, Cosmopolitan Suburbs are home to 11 million people across 233 cities. These communities are affluent. The median income was $69,000 in 2012—the second highest of all segments. But homes are still relatively affordable. In 2013, the median home price in Cosmopolitan Suburbs — like Pearland, Texas — was $183,000, up 10 percent from $166,000 at the market bottom in 2011.

A Look at the Challenged Extreme

The Demand Institute identified 525 Challenged Communities during its analysis of American communities. These cities and towns are home to 25 million people and are facing economic stress due to a weak private sector and limited employment opportunities.

Challenged Communities, like Jackson, Tenn., and Elyria, Ohio, are concentrated in the "Rust Belt" and southern part of the country — places where population growth is stagnant due to the loss of viable industries and employment opportunities. Unemployment across Challenged Communities is high and income is low. Consequently, 16 percent of households live below the poverty level. Given the stagnant economic environment, the housing recovery has been slow in these markets. The low home prices, however, have kept housing somewhat affordable.

Endangered Communities, like West Memphis, Ark., and Gary, Ind., are the country's truly distressed—plagued by weak housing markets and severe socioeconomic pressures. Nineteen percent of the households that live in the 170 Challenged Communities The Demand Institute identified live in poverty. That equates to 1.7 million people.

These communities have experienced low or negative population growth over the past 12 years, particularly low home values, low median household income and income growth, and high poverty rates. These weaknesses are associated with a range of other difficulties, such as declining employment, higher crime, lower ranked schools, and a larger-than-typical decline in housing prices during the crisis.

Without substantial intervention, some Endangered Communities could face future extinction if a majority of residents abandon them.

Comparing the Extremes

Combined, Affluent Metroburbs and Cosmopolitan Suburbs accounted for 28 percent of the U.S. housing wealth in 2012, whereas the Challenged and Endangered Communities accounted for 11 percent. The median household income among Affluent Metroburbs is $80,000, compared with $32,000 among Endangered Communities. While housing wealth is weighted at the affluent end of the spectrum (220 cities), the 1,105 cities classified as "struggling" communities by The Demand Institute illustrates the true breadth of difference across the spectrum of U.S. communities.

Insufficient access to attractive employment opportunities is the common denominator across struggling communities. Most important is the average compensation, which drives community wealth. No matter how severe the crisis, today's community situation is not destiny. There are many examples of cities and towns that have turned around their situation through a combination of public and private collaboration. Prime examples include Hoboken, N.J., and Issaquah, Wash. Three decades ago, both were facing economic weakness. Today, however, a mix of interventions has driven prosperity and stronger prospects. These are just two examples. There are — and will be — many others.

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